Monday 24th December
Cooler Reception for OPECs strategy to revive oil markets for 2019
Oil prices have been down over the past month due to over supply in the market due to pressure from Donald Trump to countries like Saudi Arabia to keep high output. After the last OPEC meetings decision to cut output by 1.2 mbpd, oil prices have slumped in the past two weeks, in contrast to the support that greeted the initial announcement. Many sources ranging from oil watchers to Russian central banks speculate that the booming US shale output and shaky oil demand may thwart OPECs work.
Trading oil prices have fallen to their lowest in a year despite the announcement from OPEC. With the reasoning behind the announcement not stopping the fall in prices down to the fact that the cut in the first half of 2019 will be able to balance the supply and demand. But in the second half of the year less crude will be needed as a slowing global economy reigns in demand and the US shale production continues to outperform. The OPEC countries may have to double their cutback just to keep the markets in equilibrium.
A drop-in price in early 2019 is not bad as Saudi Arabia was met with a similar situation in 2017, when prices fell even though they ordered a thorough cutback. This was due to a time delay in the slowing of exports and the corresponding drop in importers inventories. This year, Saudi Arabia intends to accelerate this process by targeting its export cuts at the US, where the world’s most transparent inventory data means they will be detected more readily.
In 2017, the oil cuts were helped by unplanned production losses in Venezuela, where an economic crisis staved oil output to the lowest in decades. The International Energy Agency predicts that history will repeat itself and next years cutbacks will be doubled by unintentional losses from Venezuela and by the impact of US sanctions on Iran.
There is uncertainty in the fact that not all OPEC countries may follow their promised value of cuts. With Iraq and Kazakhstan lagging behind in 2017 and with further incentive for these countries in 2019, as Iraq now has more production capacity at its disposal as it pushes on with new projects and restores output halted during a political dispute with its Kurdish population.
The biggest question that the market faces, is whether the OPEC organisation is up for the rocky task ahead.
January 2nd 2019
Oil prices rise by 4%, but there are still concerns around demand for the coming year
Brent crude futures rose $2.38 to $56.18 a barrel, a 4.4 percent gain but there are still concerns around a weakening global economy and oversupply of oil causing a sharp decline in demand. However, some analysts believe this is just a continuing trend of price volatility.
Future oil prices were initially raised by small gains in the US market, but after disappointing manufacturing data released from China and increased output of oil from Russia it quickly dampened spirits. Chinas manufacturing data showed a decline for the first time in two years in December, emphasizing the challenge Beijing has with its relationship with America. Figures today, showed that Russian production has hit a post-Soviet record in 2018 with other data also showing that USA output reached a record in October and Iran boosted oil exports in December.
January 3rd 2019
OPEC oil output posts the biggest drop since 2019
OPEC oil supply fell in December by the largest amount in almost 2 years, as top exporter Saudi Arabia made an early start to its cut in supply and Iran and Libya posted involuntary declines. The organisation pumped 32.68 mbpd last month down 460,00bpd from November and the largest month on month drop since January 2017. Oil prices have slipped to $56 a barrel, a fall from four year highs of $86 in October.
In December OPEC met and agreed on a move to reduce supply by 1.2 million bpd in 2019, in order to boost the markets recovery. The biggest drop in OPEC supply came from Saudi Arabia amounting to 400,000 bpd. This comes after Saudi Arabia reached supply highs in November of 11 million bpd after Trump ordered for supply to be kept high to stop the rise in prices and to offset losses made by Iran as the sanctions came in play. Falls in output were seen in the United Arab Emirates and Libya, where unrest led to the shutdown of the country’s biggest oilfield. However Iraq, Nigeria and Kuwait saw rises in output.
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